Visteon Corporation (NYSE: VC) today announced first-quarter 2017 results, reporting sales of $810 million compared with $802 million in 2016. First-quarter net income attributable to Visteon was $63 million or $1.91 per diluted share for 2017, compared with $19 million or $0.49 per diluted share for 2016.
First-quarter Electronics sales were $810 million compared with $793 million for the same period in 2016. Electronics first-quarter net income was $55 million or $1.67 per diluted share for 2017, compared with $38 million or $0.99 per diluted share for 2016.
Electronics adjusted EBITDA, a non-GAAP financial measure as defined below, was $101 million for the first quarter, compared with $94 million in the same period last year. Electronics adjusted net income, a non-GAAP financial measure as defined below, was $57 million for the first quarter or $1.73 per diluted share, compared with $52 million or $1.35 per diluted share in the first quarter of 2016.
During the first quarter, global vehicle manufacturers awarded Visteon new business of $1.5 billion in lifetime revenue. The ongoing backlog, defined as cumulative remaining life-of-program booked sales, was approximately $16.7 billion as of March 31, 2017, up from $16.5 billion at the end of 2016.
“We had a strong first quarter, highlighted by record Electronics sales and adjusted EBITDA,” said Visteon President and CEO Sachin Lawande. “We won significant new business that raised our order backlog to an all-time high, with noteworthy wins in infotainment and in Asia – including our third SmartCore™ cockpit domain controller win and our first in China. We also benefited from key product launches at the end of 2016 and in early 2017. Our continued focus on operational improvements helped drive adjusted EBITDA as a percent of sales to 12.5 percent.”
First Quarter in Review
Visteon Corporation
First-quarter sales were $810 million, compared with $802 million for the same period in 2016. The $8 million increase is primarily related to higher electronics production volumes and new product launches, partially offset by unfavorable currency and the exit of other operations.
Gross margin was $131 million, compared with $121 million a year earlier. The $10 million increase in gross margin reflected higher sales and the exit of other climate operations. Selling, general and administrative expenses were $51 million for the first quarter of 2017, compared with $56 million for the first quarter of 2016.
For the first quarter of 2017, the company reported net income attributable to Visteon of $63 million or $1.91 per diluted share, compared with $19 million or $0.49 per diluted share for the same period in 2016. First-quarter 2017 net income included income of $8 million from discontinued operations, net of tax; and $2 million of restructuring, transformation and related costs.
Electronics Product Group
Sales totaled $810 million and $793 million during the first quarter of 2017 and 2016, respectively, for an increase of $17 million, resulting from higher volume and product mix, particularly in Europe and China. Unfavorable currency movements and contractual customer pricing reductions partially offset the increase. On a regional basis, Asia accounted for 37 percent of sales, Europe 33 percent, North America 28 percent, and South America 2 percent.
Gross margin for the first quarter of 2017 was $131 million, compared with $126 million a year earlier. The $5 million increase in gross margin reflected the impact of higher sales volume, material cost efficiencies and a decline in engineering expenses, partially offset by customer pricing.
Adjusted EBITDA for the Electronics Product Group was $101 million for the first quarter of 2017, compared with $94 million for the same quarter last year. The improvement was primarily driven by increased vehicle production volumes and new business, and favorable currency. Manufacturing, engineering, and sales, general and administrative cost efficiencies were offset by customer pricing and higher warranty costs. Selling, general and administrative expenses were $51 million for the first quarter, compared with $56 million for the first quarter of 2016. Adjusted EBITDA margins were 12.5 percent for the first quarter of 2017, a 60-basis point improvement from prior-year levels.
For the first quarter of 2017, net income was $55 million or $1.67 per diluted share, compared with net income of $38 million or $0.99 per diluted share for the same period in 2016. First-quarter 2017 net income included $2 million of restructuring, transformation and related costs. Adjusted net income, which excludes these items, was $57 million or $1.73 per diluted share in 2017, compared with $52 million or $1.35 per diluted share in 2016.
Other Operations
By the end of 2016, Visteon exited its other operations, consisting of climate operations in South America and South Africa. The first quarter of 2016 included sales of $9 million, negative adjusted EBITDA of $5 million and a net loss of $5 million.
Cash and Debt Balances
As of March 31, 2017, Visteon had global cash and equivalents totaling $692 million. During the first quarter of 2017, Visteon paid $125 million to purchase shares of its common stock and $47 million to repurchase the India electronics business in connection with the 2015 climate transaction.Total debt as of March 31 was $396 million.
For the first quarter of 2017, cash from operations was a use of $10 million, capital expenditures were $32 million and adjusted free cash flow was a use of $30 million. The first quarter typically reflects an outflow of cash due to timing of working capital movements.
In March 2017, Visteon amended its revolving and term loan credit facilities. The amendment extended the maturity dates of each facility by three years, reduced the applicable interest rate margin on each facility by 50 basis points and upsized the revolving facility by $100 million to $300 million.
Share Repurchases
During the first quarter of 2017, Visteon entered into an Accelerated Stock Repurchase (ASR) with a third party to purchase shares of its common stock for a payment of $125 million and received 1,062,022 shares, representing 80 percent of the expected shares. This ASR is expected to be completed by May 8, 2017. The company has $275 million remaining under its current share repurchase authorization.
Full-Year 2017 Outlook
Visteon affirmed its full-year 2017 guidance for its key financial metrics. The company projects 2017 sales of $3.1 billion to $3.2 billion. Adjusted EBITDA is projected in the range of $355 million to $370 million. Adjusted free cash flow, as defined below, for the Electronics Product Group is projected in the range of $165 million to $180 million.
